Agricultural subsidies: Economically liberal Kronberger Kreis calls for a complete withdrawal from aid

This proposal is likely to cause great resentment in agriculture: leading economists and legal scholars have called for an end to all agricultural subsidies. "There is no convincing economic justification for this level of government intervention," said Lars Feld, spokesman for the Kronberger Kreis. Targeted measures in the event of market failure, for example to protect the environment and nature, can make sense. However, flat-rate subsidies for the agricultural sector are not a suitable instrument, said Feld.

The Kronberger Kreis is the scientific advisory board of the Market Economy Foundation. Its members include influential economists and lawyers who advocate strictly free-market reforms, competition and deregulation.

The reason for the study by the economically liberal professors is the upcoming negotiations on the EU's multi-annual financial framework for the years 2028 to 2034. According to the economic experts, these offer the opportunity to fundamentally realign European agricultural policy. Ifo boss Clemens Fuest said a course correction was necessary. He also referred to the security policy challenges. It is necessary to think about the distribution of financial resources.

“We cannot design our subsidies based on who sets fire to the most houses and who is the most radical.”

In Germany, agricultural subsidies from the EU, federal and state governments add up to more than ten billion euros annually, according to experts. In the past five years, state transfers accounted for around 42 percent of agricultural income. At the same time, the agricultural sector contributes less than one percent to overall economic value creation, says Fuest.

One solution is transition phases, said Fuest. He pleaded for creative will. "We cannot structure our subsidies based on who sets fire to the most houses and who is the most radical," said Fuest.

Specifically, the six scientists recommend four key reform steps:

Reduce agricultural subsidies: End national support programs and phase out European direct payments as part of the reorganization of the Common Agricultural Policy (CAP).

Abolish special competition law rules: In principle, the same rules should apply to agriculture as to other economic sectors.

Reduce bureaucracy: Reduce agricultural-specific regulations and administrative requirements to the necessary level.

Address environmental problems in a targeted manner: replace flat-rate funding with effective, polluter-friendly instruments.

The former head of the Monopolies Commission, Justus Haucap, said that the demands should also be understood as a “wake-up call” to politicians. "We have moved away from even talking about the principles and have become accustomed to the fact that it is God-given that agriculture is subsidized."

The experts also criticize that free trade agreements often fail due to resistance from farmers - even though consumers and other sectors of the economy would benefit from them.

The economists cited Australia and New Zealand as examples of countries in which agriculture functions with significantly less market intervention. New Zealand agriculture has undergone a kind of “shock therapy” in the course of reforms and is considered efficient. However, many small businesses there have also left.

The Kronberger Circle includes the economists Lars Feld, Clemens Fuest, Justus Haucap, Volker Wieland and Berthold Wigger as well as the tax lawyer Johanna Hey.